In order to get the best deal possible, companies must consider a number of legal factors when seeking to acquire a business or its assets. Business owners also face several considerations when selling a company, such as limiting future liability for lawsuits against the entity.
A Virginia business merger and acquisitions lawyer could help you nail down key deal terms when acquiring or selling a company. The knowledgeable business attorneys at our firm could walk you through drafting documents related to your merger or acquisition with help from our Handshake Portal.
Before negotiating key terms for a purchase agreement for a merger or acquisition in Virginia, a lawyer from Earley Business Legal can provide guidance at the key stage of a letter of intent (LOI).
An LOI is typically created in the early stages of a transaction because it allows the parties to negotiate and agree upon the deal terms upfront. While the document is not as comprehensive as a purchase agreement, an LOI formalizes the parties’ commitment to the deal and sets key terms for the deal. Often, the most important business and legal terms are won or lost at the LOI stage, which is why it is so important to get an attorney involved early.
The LOI gives the parties an opportunity to negotiate the high-level terms of the transaction, like the purchase price and transaction structure. It also allows the parties to explore a transaction while maintaining confidentiality about the deal.
Once a strong LOI is in place, the parties can begin to draft the definitive transaction documents that will govern the deal—such as a stock purchase agreement or an asset sale agreement—based on the clear guide of the LOI, which provides a clear outline of the agreed-upon terms and facilitates a smoother drafting process.
A well-crafted LOI should address as many terms as possible. This will help streamline the process of drafting the definitive transaction documents. In addition to terms like purchase price and transaction structure, the LOI should identify the relevant parties or legal entities agreeing to the transaction. The parties can also negotiate other relevant pricing terms, such as:
Since LOIs impose confidentiality restrictions on the parties, the LOI should also clearly outline the duration of these provisions. The parties can also address exclusivity periods in the event a buyer or seller is no longer interested in pursuing the transaction.
Other common provisions addressed in LOIs include:
The substance of these provisions will vary by the type of business. Some companies also need to address issues such as intellectual property rights, including trademarks, patents, and copyrights.
A Virginia business merger and acquisitions attorney could advise you on the most essential terms to include in your LOI. Because most parties at the LOI stage are still uncertain about whether a deal will be struck, most parties want to minimize legal expenses. This is why we streamlined the LOI process into our Handshake Portal. The Handshake Portal is a very simple and cheap way to guide you through the process of drafting an LOI without complicated legal jargon. After you enter some basic information about the company, the Handshake Portal automatically generates the LOI—after which one of our seasoned legal professionals will look it over and discuss it with you, all for a predictable fixed cost.
The answer is mostly not. While an LOI is a great way to outline important deal terms, the parties must still negotiate the definitive and fully binding transaction documents. Since LOIs occur before the due diligence stage of the transaction and there is still much to be learned about the company, an LOI is almost never legally binding as to completing the deal. Usually, both parties can back out of a sale even after an LOI.
However, an LOI almost always is binding with respect to the confidentiality and exclusivity provisions. In other words, even if parties back out, a buyer cannot disclose the confidential information it obtained, and the seller cannot sell to someone else within the exclusivity period.
Obtaining a skilled deal lawyer like the ones at Earley Business Legal at the early stages of merger or acquisition negotiations in Virginia is especially helpful to ensure these rights are enforceable and the exclusivity period is the right length.
The parties might also need to draft new ancillary documents to outline their post-closing relationship, such as amending or drafting a new operating, partnership, or shareholder agreement. These updated agreements often outline the company’s new ownership structure, how equity holders will vote on key decisions, and other necessary terms identified during negotiations.
Many mergers or acquisitions lead to litigation when there is conflict or disagreement about essential deal terms. Hiring an experienced Virginia business merger and acquisitions lawyer at the outset of negotiations could help ensure that every party clearly understands their obligations.
Contact Earley Business Legal today to schedule a consultation. In the meantime, head over to our Handshake Portal to get started on the LOI drafting process.
When setting up your company or preparing business agreements, a well-practiced Virginia business lawyer could help save you from future headaches and costly litigation.
The legal professionals at our firm use our Handshake Portal to help get you started in the right direction for your contractual needs without the complicated legal jargon. To help minimize your legal costs, we provide these services at a fixed fee rate. Contact us today to schedule a consultation and get started.
